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Property Tax Reliance

In 2023, the effective property tax on the median-value owner-occupied home was seventh highest in the United States. Texas ranked fourth highest for the share of state and local revenue from the property tax. See Selected Property Tax Statistics

Administration and Assessment

Cities, counties, independent school districts (ISDs), and special districts (such as hospital or mosquito control districts) all levy property taxes. Property is assessed at 100 percent of market value and is revalued at least once every three years. The state does not require physical re-inspection.

Local governments within Texas tax some types of personal property, and Texas is one of nine states that tax business inventories (Fritts and Walczak 2022, 74). The Texas Supreme Court has held that taxing inventories does not violate the prohibition on state property taxes.

Assessment is carried out by county appraisal districts (CADs). Each CAD is governed by a board of directors appointed by the local governments. The office of the Texas Comptroller provides guidance to the appraisal districts and conducts performance audits to ensure compliance with state laws and regulations. CADs have the same borders as counties except in one instance where two counties share a combined district. Each CAD also establishes an appraisal review board to adjudicate disputes between property owners and the CAD as well as objections or queries raised by the taxing units.

Limits on Property Taxation

The Texas Constitution sets limits on levels of property taxation, including rate limits, levy limits, full disclosure and truth in taxation requirements, and an assessment limit. The limits are complex, sometimes depending on the use of the revenues and sometimes on antiquated distinctions between how cities were incorporated (Significant Features of the Property Tax).

The state caps the increase in assessed values for a homeowner’s primary residence. Assessed values are not permitted to increase by more than 10 percent since the previous assessment (not counting the value of improvements to the property) and may not exceed market value if market value is lower than capped assessed value (Significant Features of the Property Tax). See Property Tax Features

Property Tax Relief and Incentives

With respect to real property, the state imposes mandatory exemptions and tax caps while also permitting taxing units to enact others (Texas Comptroller of Public Accounts). For residential homesteads, the state imposes a $100,000 exemption against taxes levied by school districts. All taxing units have the option of offering an exemption equal to as much as 20 percent of a property’s value but not less than $5,000. More than 20 percent of the state’s school districts offer an optional homestead exemption (Significant Features of the Property Tax). State residents over age 65 or disabled are entitled to an additional $10,000 exemption for school taxes, and cities, counties, and school districts have the option of exempting $3,000 or more for seniors and disabled taxpayers. Additionally, the state mandates a $3,000 exemption for primary residences in counties that raise revenue from farm-to-market roads or flood control taxes (Texas Comptroller of Public Accounts 2024, 23).

School districts must freeze property taxes for taxpayers who are over age 65 or disabled who are receiving exemptions. The freeze limits tax liabilities (for the portion of the property tax allocated to schools) to taxes owed for the year the taxpayer first received the exemption. Taxpayers who change residences are entitled to an exemption equal to the percentage of tax savings that they were receiving prior to the move. The over-65 exemption and tax cap is transferable to surviving spouses who were at least 55 years of age when widowed. Cities and counties have the option to offer the freeze benefit (Significant Features of the Property Tax; Texas Comptroller of Public Accounts 2024, 6).

U.S. military veterans with 100 percent disability ratings from the Department of Veterans Affairs are completely exempted from all property taxes on their primary residence, as are unremarried spouses of veterans or first responders killed in the line of duty. Jurisdictions are required to offer partially disabled veterans and their spouses partial exemptions (Significant Features of the Property Tax; Texas Comptroller of Public Accounts 2024, 7–8). Despite its high effective property tax rates, Texas does not have a property tax circuit breaker.

Texas employs several property tax exemptions for economic development, including enterprise zone tax abatements and tax increment financing for reinvestment zones (Significant Features of the Property Tax).

Key Property Tax History

The current Texas property tax system owes its structure to the 1979 “Peveto Bill,” named after its sponsor, former state representative Wayne Peveto.

Prior to 1979, taxing units had great autonomy, little coordination with overlapping taxing units, and virtually no overarching superstructure—with what did exist usually emanating from court rulings. The same property might be appraised at vastly different values by each of its jurisdictional taxing units. Furthermore, properties of equal market value might have substantially different assessed values depending on how recently they were last sold. The lack of formal rules for appraisals or schedules for reappraisal led to complaints and lawsuits questioning the system’s fairness. Rapid increases in house prices during the 1970s exacerbated these problems, as did state aid for education formulas, which were based partly on the assessed value of each district’s tax base.

The Peveto Bill brought significant reforms to the Texas property tax system. It separated appraisals from tax collection by creating the central appraisal districts, required assessment at full market value, mandated reassessment at least once every three years, and improved state oversight and guidance by creating the State Property Tax Board, although the board was eliminated in 1982, with many of its responsibilities transferred to the Comptroller’s Office (Haney 2015).

Texas has had a long series of court challenges to its school finance system, starting in 1973 with San Antonio Independent School District v. Rodriguez, with many disputes still ongoing. Court challenges have alleged that the Texas school finance system has created a de facto state property tax in violation of the state constitution. State law puts a cap on local property tax rates for school districts. Since, at times, the majority of school districts have been at the cap, without the ability to lower tax rates because of their revenue needs or to raise tax rates, critics of the system argued that the school property tax had been converted into a state property tax (Texas Taxpayers and Research Association 2014).

In the 2014 case Morath v. The Texas Taxpayer and Student Fairness Coalition, District Court Judge Dietz ruled that the Texas school finance system violated the Texas Constitution on issues of equity and adequacy, and that it employed a de facto state property tax (Texas Taxpayers and Research Association 2014). In May 2016, the Texas Supreme Court unanimously reversed the trial court’s ruling in the case (SchoolFunding.Info). In their ruling, the “justices noted that the school funding system is ‘undeniably imperfect with immense room for improvement. But it satisfies minimum constitutional requirements. Accordingly, we decline to usurp legislative authority'” (Parsons 2016).

Recent Developments

Voters passed two constitutional amendments to increase exemptions from the property tax in May 2022. Proposition 1 allowed homeowners who are 65 or older or disabled to benefit from additional reductions in school property taxes when school district tax rates for maintenance and operations are reduced. Before this amendment, their school property taxes were frozen and did not decrease even when tax rates were lowered due to tax limit provisions enacted by Senate Bill 2 of 2019. Proposition 1 addressed this by allowing their frozen taxes to be recalculated at the lower rates and then refrozen at the reduced level (Mendez 2022). The other amendment, Proposition 2, increased the mandatory homestead exemption for the school district portion of the property tax from $25,000 to $40,000 (Lindell 2023).

Flush with budget surpluses, Governor Greg Abbott made cutting property taxes a priority for the 2023 legislative session. While property tax relief was not enacted during Texas’s 2023 regular legislative session, Governor Abbott called for two special sessions to address this issue (Hamilton 2023a). On July 22, 2023, Governor Abbot signed into law a tax reduction package that included property tax cuts (Senate Bill 2) and franchise tax cuts for small businesses (Senate Bill 3). He boasted that the “largest property tax cut in Texas history, and likely the world” would return $18 billion of the state’s record surplus to taxpayers in the form of tax relief. Senate Bill 2 reduced school district property tax rates by 10.7 cents per $100 of assessed value and raised the school property tax homestead exemption from $40,000 to $100,000 (and $110,000 for seniors), quadrupling the exemption from $25,000 to $100,000 in less than two years. The legislation also temporarily capped increases in appraisals for non-homestead property valued under $5 million, limiting increases to 20 percent per year for three years. The state is expected to reimburse local governments for the projected $12.7 billion property tax loss (Harper 2023; Jones 2023a). In November 2023, voters approved a constitutional amendment (Proposition 4, introduced as House Joint Resolution 2) authorizing the property tax cuts to take effect (Ballotpedia 2023b).

Voters approved two additional constitutional amendments at the ballot in November 2023. Proposition 2 authorized counties and cities the option of offering partial or full property tax exemption on properties used to operate child-care facilities (Ballotpedia 2023a). Proposition 10 exempted equipment and inventory manufactured by medical or biomedical companies from the property tax (Ballotpedia 2023c).

A year after letting the expansive Chapter 313 business property tax incentive expire, Texas enacted a new business property tax incentive in 2023. Under Chapter 403 (enacted by House Bill 5 of 2023), qualifying businesses may receive up to a 50 percent reduction in school district maintenance and operations property taxes for 10 years. To qualify for the state-funded incentive, a business must demonstrate that the development would not occur in Texas without the incentive, and must fulfill investment, wage, and hiring requirements laid out in an agreement approved by both the state comptroller and the school district. The new incentive is more restrictive than its predecessor and does not permit payments to school districts from developers, an oft-criticized feature of the expired Chapter 313 incentives (Jones 2023b).

In a 2024 ruling in Bexar Appraisal District v. Yvonda Johnson (No. 22-0485), the Texas Supreme Court affirmed an appellate decision, allowing a homestead exemption to the plaintiff, a 100 percent disabled veteran, despite her husband receiving a homestead exemption on a second home. The supreme court held that due to the plaintiff’s 100 percent disability rating, a one-per-family limit does not apply. The court’s reasoning included that the Texas Legislature's definition of "homestead" focuses on the characteristics and use, without referencing marital status, and that the disabled exemption is awarded to individuals, not families. The court noted that the legislative intent is to treat disabled veterans differently, exempting them from the usual limitations of homestead exemptions (Lynch 2023).

Amid surging property taxes, Texas Lieutenant Governor Dan Patrick ordered the Senate to study and report “on the cost of eliminating school maintenance and operation property taxes, all school property taxes, and all property taxes.” According to the Senate report, the state would need $81.5 billion to completely eliminate all local property taxes (Davies 2024).

In his 2025 State of the State address, Governor Abbott made property tax relief an emergency item (Office of the Texas Governor 2025). In June 2025, he signed a package of bills, Senate Bill 4, Senate Bill 23, and House Bill 9, aimed at providing property tax relief to homeowners and small business owners. Senate Bill 4 increases the homestead exemption for school property taxes from $100,000 to $140,000 for most Texas homeowners. Senate Bill 23 provides an additional $60,000 school property tax exemption for seniors age 65 and older and individuals with disabilities, raising the total homestead exemption to $200,000 when combined with the general exemption. Both Senate Bill 4 and Senate Bill 23 will take effect retroactively to January 1, 2025, pending approval by voters. House Bill 9 raises the business personal property exemption from $2,500 to $125,000, primarily benefiting small businesses, and will become effective retroactively on January 1, 2026, if approved by voters. The legislation totals $10 billion in property tax relief and is projected to save the average homeowner $484 annually, while seniors and disabled homeowners could see savings of $950 per year. Small business owners are expected to benefit from average annual savings of $2,500. Because these legislative changes require amendments to the Texas Constitution, they must be approved by voters in the November 2025 election to take full effect (Kite and Dial 2025; Wahrmund 2025).

Sources

Ballotpedia. 2023a. “Texas Proposition 2, Property Tax Exemption for Child-Care Facilities Amendment (2023).” https://ballotpedia.org/Texas_Proposition_2,_Property_Tax_Exemption_for_Child-Care_Facilities_Amendment_(2023.

———. 2023b. “Texas Proposition 4, Property Tax Changes and State Education Funding Amendment (2023).” https://ballotpedia.org/Texas_Proposition_4,_Property_Tax_Changes_and_State_Education_Funding_Amendment_(2023.

———.  2023c. “Texas Proposition 10, Tax Exemption on Medical Equipment and Inventory Amendment (2023)”. https://ballotpedia.org/Texas_Proposition_10,_Tax_Exemption_on_Medical_Equipment_and_Inventory_Amendment_(2023.

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———. 2023b. “‘Tax Ferrets’ in the ‘Property Tax Netherworld.’” State Tax Notes. June 5. https://www.taxnotes.com/tax-notes-state/tax-history/tax-ferrets-property-tax-netherworld/2023/06/05/7gthh.

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———. 2023b. “Texas Resurrects School Property Tax Incentives for Commercial Projects.” State Tax Notes. June 19. https://www.taxnotes.com/tax-notes-state/legislation-and-lawmaking/texas-resurrects-school-property-tax-incentives-commercial-projects/2023/06/19/7gvlv.

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———. 2025a. “Governor Abbott Delivers 2025 State of The State Address.” Press Release. February 2. https://gov.texas.gov/news/post/governor-abbott-delivers-2025-state-of-the-state-address.

———. 2025b. “Governor Abbott, Lieutenant Governor Patrick, Speaker Burrows Laud Property Tax Relief Passage.” Press Release. May 30. https://gov.texas.gov/news/post/governor-abbott-lieutenant-governor-patrick-speaker-burrows-laud-property-tax-relief-passage.

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